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Verizon moves to expand online video

SAN FRANCISCO -- That didn't take long. Less than a week after a federal appeals court ruled that Internet service providers no longer have to treat all Web traffic equally, one telecom services giant got

Less than a week after a federal appeals court ruled Internet service providers no longer have to treat all Web traffic equally, one telecom services giant got ready to expand its own streaming video offerings.

Verizon Communications today said it will acquire the online TV business of chip-maker Intel, which struggled to get its own Internet-based video service off the ground.

The move will turn up the heat on Netflix, the No. 1 provider of online movies and TV shows, which sends its content over high-speed broadband connections built by Verizon, AT&T and large cable companies.

Some analysts have estimated that last week's court ruling, which tossed out so-called Net Neutrality rules previously set down by the Federal Communications Commission, could cost Netflix between $75 million and $100 million in additional costs.

Netflix will release fourth-quarter results after the close of markets Wednesday. Analysts expect the company to report sales in the quarter rose 23% to $945 million.

Telecom and Internet service providers have long complained that neutrality rules let Netflix and other video content providers clog their broadband pipes for free.

Verizon sued to overturn the rules in 2011, and the court ruling last week was a big win for the telecom services industry.

Without those rules, New York-based Verizon and other large broadband companies are now free to charge Netflix, Hulu, Google's YouTube unit and other Web video sites to use their high-speed networks -- even as the cable and telecom giants expand their own digital entertainment offerings.

John Shinal, technology columnist for USA TODAY.(Photo: USA TODAY)

Verizon today said revenue from its bundle of Web, phone and TV services, known as FiOS, rose 15% in the fourth quarter, helping total revenue rise slightly to $31.1 billion.

In its earnings report, the company said it now has 5.3 million video subscribers after signing up 92,000 during the quarter.

On its Web site, Verizon advertises several different FiOS offerings ranging in price from $95 per month to $155 per month, plus taxes, fees and equipment charges.

That's a far cry from the $8 a month charged by Netflix, which said in October its number of U.S. subscribers rose 24% from a year earlier, to 31 million.

It now reaches more American consumers than leading cable entertainment channels HBO or Showtime.

While the Net Neutrality ruling and Verizon's quick move to exploit it will increase competitive pressure on Netflix, the online company's service remains an attractive offering thanks to its price, ubiquity and its large number of shows and movies.

To bolster its offerings, it's also producing its own content, such as its first original series, the popular House of Cards.

It was a lack of content-licensing deals for popular TV shows and movies that hampered Intel's online video service.

Verizon, which along with AT&T is a dominant provider of U.S. phone and Internet service, is in a much-stronger position than Intel was to negotiate licensing deals.

So even if Verizon is unable or unwilling to start charging Netflix to use its network, the online upstart could face increased competition for content from the telecom giant.

John Shinal has covered tech and financial markets for 15 years at Bloomberg, BusinessWeek, the San Francisco Chronicle, Dow Jones MarketWatch, Wall Street Journal Digital Network and others. Follow him on Twitter: @johnshinal.